“Positive Impact Business: Economic and Financial Benefits”, Dissertation by  Evelyn Sukadolnik

The final paper of a three-part series based on the dissertation presented in September 2019 for the LLM in Comparative Law, Economics and Finance at International University College of Turin (IUC) and Università degli Studi di Torino (UNITO) with the assistance of Prof. Dr. Daniela Carosio. It proposes to discuss legal, economic and financial aspects regarding for-profit companies that incorporate sustainability in their practices and, beyond, as their core business.

Dissertation title: For-benefit corporations and a business culture shift

by Evelyn SukadolnikBBA (Hons), LLB, PgD Branding, LLM, Professional in the Financial Market, volunteer at Trê Investindo com Causa (non-profit association for positive impact investment), independent consultant at IFAD-UN. E-mail: sukadolnik@alumni.usp.br


Whereas some critics doubt “for-benefit” companies can be as profitable as (or more than) “traditional” ones while they strive to produce positive impacts, studies have consistently shown evidence it is not only possible but already happens. In this final article, we propose to discuss the repercussions of this business model in market performance, return-risk ratio, preference of customers and investors, access to credit, engagement of workers, reputation and brand value. Is the business market’s paradigm finally shifting?

The mindset of cutting costs to maximize profits may be too risky. In 2011 Zara, a retail fashion part of Inditex company outsourced its Brazilian production to AHA that sub-contracted a factory where Bolivian immigrants were found in slave-like conditions. The scandal damaged Zara’s reputation and costs incurred with punitive fines, employees’ compensation and improving the supply chain tracking were higher than the savings expected with the outsourcing. This exemplifies why Environmental, Social and Governance (ESG) issues are becoming increasingly important to investors, as they can also be a “risk management tool” as highlighted by Tett (2019), managing editor of the Financial Times. Meanwhile, we can observe an upward trend in demand for ESG funds, green bonds and other impact investing options and it is not a moral choice of the investors: those companies exhibit strong financial performance and resilience.

Eccles et al (2012) found significant differences analyzing U.S. companies from 1993 to 2010: comparing to the ‘control group’, the ‘high sustainable group’ was more likely to measure, audit and disclose governance, social and environmental data, engage stakeholders to identify risks and opportunities. This group also had more long-term investors, higher economic value and they “outperform the control firms in terms of both stock market and accounting performance”, with lower volatility. They were also better in return-on-equity (ROE) and return-on-assets (ROA), especially for companies using natural resources and for B2C (business-to-customer) where brand and reputation are more relevant.

Likewise, Chen & Kelly (2014) compared B-Corps with non-B-Corps in the period 2007-2011. They concluded B-Corps had similar or better levels of the growth rate of total revenue and of employee productivity than their competitors in the same industry sector. The authors also verified companies in the top quartile score of the B-Impact Assessment had stronger results in revenue and productivity growth comparing to the bottom quartile. It indicates improved CSR practices may enhance economic performance.

Moreover, transparency, trust and collaboration improve stakeholders’ engagement, which for instance may reduce transaction costs with reliable suppliers or attract more talented workers. Plus, higher accountability implies less due-diligence costs to funding sources, enhancing access to credit. This approach contributes to avoiding “short-termism”, allowing managers to develop innovative projects. Eccles et al (2012:27) conclude: “A more engaged workforce, a more secure license to operate, a more loyal and satisfied customer base, better relationships with stakeholders, greater transparency, a more collaborative community, and a better ability to innovate may all be contributing factors to this potentially persistent superior performance in the long-term.” Both studies show a correlation between high CSR standards and good corporate management, fostering competitive advantages and strong long-run financial performance.

We emphasize the studies previously shown analyzed periods covering the subprime crisis (2007-2008). Those companies kept their social and environmental commitments in situations of financial difficulties and also went through the crisis with more resilience than the “traditional” ones. It demonstrates that seeking a sustainable purpose is not a burden interfering with a company’s competitiveness.

Moving further in our analysis, we should look closer to employees. Nowadays a meaningful work gains relevance – mainly for a younger workforce. As Mirvis (2012) observes, “CSR is being used today as a ‘tool’ to recruit, retain, and engage employees”. One might say volunteer work brings benefits such as humanize the working environment, integrate different teams, enhance proximity with the community and also contribute to participants’ personal satisfaction, but it is treated as an “extra” activity. By my professional experience of 14 years in multinational banks, it does not encompass all employees, it is sporadic and may be seen as superficial or philanthropic, once it is not connected to the company’s core and its role in the society. Nonetheless, daily work opportunities connected to sustainability may lead to a ripple effect: it builds a positive corporate culture, potentially reduces costs and enhances productivity, while endows the company purpose of doing genuine efforts towards positive impact – not as a complementary activity, but as part of its core business. A B-Corp example: Patagonia is an American apparel company that advocates reducing consumerism by offering long-life products. When sustainability is embedded in the corporate culture and its employees share the commitment with social and environmental responsibility, the company is able to demonstrate its sustainable authenticity because it is from inside out: it is the DNA.

This is intrinsically connected to brand value, and we can move to the final part of this article. Today it is difficult to notice considerable differences among products only by comparing their features or tangible aspects and, to avoid a price war, companies stepped up their investments in intangible aspects: brands. We may suggest that in the present business era well-made brands (1) add more value to the company than tangible assets, explaining why Google is much more valuable than any automobile corporation and (2) attract consumers by involving them with emotional identification. There are numerous ways to create brand positioning, but it has to be connected to the company as a whole, to its identity and essence, so purpose became central in any business strategy.

Taking those concepts, it is possible to verify the positive repercussions of sustainable practices in the brand’s expression. However, simply be “eco-friendly”, “philanthropic” or adopt basic CSR initiatives is not enough to meet 21st century society’s demands. Actually, it might be risky for a corporation to portray itself as sustainable only by taking complementary acts that could be questioned as incoherence, false discourse or greenwashing. On the other hand, when a company incorporates sustainability in its core business and addresses positive social and environmental impact as its purpose, there is a genuine reverberation connecting all positive results we discussed. Nevertheless “for-benefit” companies reflect a rising trend and their strong results are proven, this model currently does not represent the majority of the firms because the profits maximization paradigm continues narrowing the context. How long is this mindset going to last?

We would like to end this reflection by asking if we are finally touching a turning point in business culture. In 2019, 181 CEOs including Jeff Bezos (Amazon), Tim Cook (Apple), Jamie Dimon (JP Morgan) and Doug McMillon (Walmart) signed the ‘Statement on the Purpose of a Corporation’ of The Business Roundtable (BRT). They committed to creating value for all stakeholders: customers, employees, suppliers, communities, the environment and shareholders. It means leaders of important large companies recognized they should quit the shareholder supremacy and move forward sustainability because it can be more profitable and address societal challenges that they have been demanded. As it may be early to say how seriously they are committed, we believe there is finally something new in the business narrative. Hopefully soon the “for-benefit” model will become the only kind of business possible, and allowed, to exist in our society.



B-Lab. About B-Corps: Meet the Community.  Retrieved from: https://bcorporation.net/about-b-corps

Burgen, S. & Phillips, T. (2011, August 18). Zara accused in Brazil sweatshop inquiry. The Guardian. Retrieved from: https://www.theguardian.com/world/2011/aug/18/zara-brazil-sweatshop-accusation

Business Roundtable (BRT). (2019, August 19). Our Commitment. Statement on the Purpose of a Corporation. Retrieved from: https://opportunity.businessroundtable.org/ourcommitment

Chen, X., & Kelly, T. F. (2015). B-Corps – A growing form of social enterprise: Tracing their progress and assessing their performance. Journal of Leadership & Organizational Studies, 22(1), 102-114.

Eccles, R. G., Ioannou, I., & Serafeim, G. (2012). The impact of a corporate culture of sustainability on corporate behavior and performance (No. W17950). Cambridge, MA, USA: National Bureau of Economic Research.

Mirvis, P. (2012). Employee engagement and CSR: Transactional, relational, and developmental approaches. California Management Review54(4), 93-117.

Tett, G. (2019, June 18). Ethical investing has reached a tipping point. Financial Times. Retrieved from: https://www.ft.com/content/7d64d1d8-91a6-11e9-b7ea-60e35ef678d2